Movie Gallery, owner of the Hollywood Video movie rental chain, has filed for Chapter 11 bankruptcy protection and plans to close 805 stores — about a third of its total.

It's the second trip through bankruptcy court in just three years for Movie Gallery. The company is struggling with competition as more people stream videos online from Netflix and other services or pick up $1-a-night rentals at Redbox kiosks.

Redbox said in December that it had 22,210 DVD kiosks and is expanding them at the rate of 900 a month. Blockbuster is also rolling out kiosks for DVD rentals.

Movie Gallery first landed in bankruptcy court in October 2007, unable to sustain the debt it took on in its $850 million acquisition of rival Hollywood Entertainment in 2005. Movie Gallery agreed to assume about $350 million of Hollywood Entertainment's debt as part of the deal.

The acquisition made Movie Gallery the No. 2 rental chain in the country behind Blockbuster. But it has been forced to close more than 2,400 stores in the past three years, leaving about 2,600 still open, according to court filings.

Despite moving to shut down unprofitable locations, the company said it continued to see "significant" losses in 2009. Annual revenue fell $546 million, or 28%, to $1.4 billion.

In a court filing in the U.S. Bankruptcy Court for the Eastern District of Virginia in Richmond, Movie Gallery's Steve Moore, chief restructuring officer, said the company was facing "looming defaults" on its loan agreements.

The company listed debts of $500 million to $1 billion, compared with assets of $10 million to $50 million.

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